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How to protect against former employee’s using your confidential information against you

Employers may often have to give an employee access to confidential information such as algorithms, confidential processes, pricing, financial information and strategy, in order for the employee to do their job.

It is generally accepted that while the employee remains employed with a business, he or she has a duty not to use any such confidential information for his/her own benefit or the benefit of a third party to the detriment of the business. In the absence of contractual confidentiality provisions, however, a business’ confidential information can be less secure post termination of the employment relationship.

The question therefore, arises as to what pre-cautions an employer can take to reduce the risk of employees using their confidential information in favour of a new employer or to set up their own competing business.

The Courts and “trade secrets”

The famous UK case of Faccenda Chicken Ltd –v- Fowler [1987] Ch.117 is regularly referenced when it comes to the question of post termination protection of confidential information. That case provided that where the employment relationship has terminated, information that is so confidential it amounts to a “trade secret” will remain protected even in the absence of a contractual clause to that effect.

However, where an employer has confidential information it needs to protect, it is important to include a confidentiality clause in the employee’s contract of employment. By addressing this, the employer can later seek to rely on such contractual provision rather than being left to prove that the information meets the confidentiality threshold of a trade secret.

Getting your employment contracts right

It is important that the employer considers the question of confidentiality at the very outset of the employment relationship and protects its future position by including appropriate confidentiality provisions at that stage.

Restrictive covenants

Employers can also use post termination restrictive covenants to protect their confidential information from being used by an employee moving to a competitor. Post termination restrictive covenants in the employee’s contracts could include non-compete clauses and clauses preventing the employee from soliciting customers for a specified period of time following the termination of their employment.

Post termination restrictive covenants can be difficult to enforce (particularly non compete clauses). In order to maximise the chances of enforceability, these covenants should be drafted as narrowly as possible and go only so far as is reasonably necessary to protect the legitimate business interest they are designed to protect.

Reviewing contracts

An employer should keep their contracts under review. As an employee progresses through the ranks and perhaps gains seniority and / or more fulsome access to confidential information it is desirable that the employee’s contract be reviewed to ensure it remains fit for purpose particularly in so far as the confidentiality provisions and restrictive covenants are concerned. It may even be worth renegotiating the employee’s contract so that this can be achieved.

Confidentiality clauses

Robust confidentiality clauses can prove invaluable to an employer when a senior employee decides to move on and especially when coupled with appropriate post termination restrictive covenants can act as a powerful deterrent to the use by employees of confidential information in a manner which can damage their former employer’s business.

Confidentiality policy

In addition to providing for the protection of confidential information in the contract itself, depending on the nature of the employer’s business, it may also be worth considering introducing a designated policy on confidentiality so as to impress on employees the importance of respecting the confidentiality of sensitive company information acquired by them during the course of their employment.

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